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The currency board arrangement and widespread dollarization of the Argentine economy since 1991 have laid the basis for domestic interest rates to converge to international levels. Although such a convergence has been observed for interest rates on bank deposits, interest rates on bank lending remain well above industrial country levels. This paper examines the causes of high intermediation spreads in Argentina using a dual currency model of the banking industry, which incorporates key features of credit markets in that country. Empirical results allow inferences to be drawn on the effects of macroeconomic and financial policies on bank lending and interest rates.

Banks and Banking --- Money and Monetary Policy --- Industries: Financial Services --- Interest Rates: Determination, Term Structure, and Effects --- Financial Markets and the Macroeconomy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banking --- Monetary economics --- Finance --- Financial services law & regulation --- Currencies --- Loans --- Exchange rate risk --- Bank credit --- Financial institutions --- Money --- Financial regulation and supervision --- Commercial banks --- Banks and banking --- Financial risk management --- Credit --- Argentina

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This paper presents new estimates of export and import equations for Argentina, using a broader set of variables than previous studies and distinguishing between intra- and extra-MERCOSUR trade. It measures the importance of relative price versus income effects in accounting for the higher trade deficit during the 1990s, and examines whether foreign trade elasticities have increased as a result of structural changes in the economy. It finds that the high income elasticity of imports and the responsiveness of exports to changes in world commodity prices, domestic absorption, and economic activity in Brazil have been key determinants of Argentina’s trade balance.

Exports and Imports --- Foreign Exchange --- Macroeconomics --- Neoclassical Models of Trade --- Empirical Studies of Trade --- Trade: General --- Price Level --- Inflation --- Deflation --- International economics --- Currency --- Foreign exchange --- Exports --- Imports --- Real exchange rates --- Trade balance --- Export prices --- International trade --- Prices --- Balance of trade --- Argentina

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Empirical studies have had little success in finding a statistically significant relationship between fiscal deficits and inflation in broad cross-country panels. This paper provides new econometric estimates for a panel of 23 emerging market countries during 1970-2000. Unlike previous studies, we allow for a rich dynamic specification and focus on the long-run relationship between the two variables controlling for differences in the inflation tax base. We find that a 1 percentage point reduction in the ratio of fiscal deficit to GDP typically lowers long-run inflation by 1½ to 6 percentage points, depending on the size of the inflation tax base.

Exports and Imports --- Foreign Exchange --- Inflation --- Macroeconomics --- Public Finance --- Price Level --- Deflation --- Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General --- Debt --- Debt Management --- Sovereign Debt --- Energy: Demand and Supply --- Prices --- International Lending and Debt Problems --- Public finance & taxation --- Currency --- Foreign exchange --- International economics --- Government debt management --- Oil prices --- Exchange rate arrangements --- Interest payments --- Public financial management (PFM) --- External debt --- Debts, Public --- Debt service --- United States

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A perennial question in international finance is to what extent stock returns are influenced by country-location, as opposed to industry-affiliation, factors. This paper develops a novel methodology to measure these effects, in which portfolios mimicking "pure" country and industry factors are first constructed and their joint dynamics then modeled as regime-switching processes. Estimation using global firm-level data allows us to identify well-defined volatility states over the past thirty years and shows that the contribution of the industry factor becomes systematically more prominent during high global volatility states, while the country factor contribution declines. Using the model's estimates, we find that portfolio diversification possibilities vary considerably across economic states.

Econometrics --- Finance: General --- Investments: Stocks --- Public Finance --- Portfolio Choice --- Investment Decisions --- International Financial Markets --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Financial Markets and the Macroeconomy --- General Financial Markets: General (includes Measurement and Data) --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- National Government Expenditures and Related Policies: General --- Finance --- Investment & securities --- Econometrics & economic statistics --- Public finance & taxation --- Stocks --- Market capitalization --- Stock markets --- Time series analysis --- Public expenditure review --- Financial institutions --- Financial markets --- Expenditure --- Econometric analysis --- Financial services industry --- Stock exchanges --- Expenditures, Public --- United States

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Macroeconomic theory postulates that fiscal deficits cause inflation. Yet empirical research has had limited success in uncovering this relationship. This paper reexamines the issue in light of broader data and a new modeling approach that incorporates two key features of the theory. Unlike previous studies, we model inflation as nonlinearly related to fiscal deficits through the inflation tax base and estimate this relationship as intrinsically dynamic, using panel techniques that explicitly distinguish between short- and long-run effects of fiscal deficits. Results spanning 107 countries over 1960-2001 show a strong positive association between deficits and inflation among high-inflation and developing country groups, but not among low-inflation advanced economies.

Budgeting --- Foreign Exchange --- Inflation --- Macroeconomics --- Public Finance --- Price Level --- Deflation --- Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General --- Debt --- Debt Management --- Sovereign Debt --- Energy: Demand and Supply --- Prices --- National Budget --- Budget Systems --- Public finance & taxation --- Budgeting & financial management --- Currency --- Foreign exchange --- Government debt management --- Oil prices --- Budget planning and preparation --- Exchange rate arrangements --- Public financial management (PFM) --- Debts, Public --- Budget --- United States